Allowance for the Use of a Motor Vehicle
An allowance received by an employee for the use of a motor vehicle (This link will open a new window) is considered reasonable, and does not have to be included on the RL-1 slip (see courtesy translation RL-1-T), if all of the following three conditions are met:
- The measurement of the employee's use of the vehicle for the purpose of determining the allowance is based solely on the actual number of kilometres for which the vehicle is used by the employee in the performance of his or her duties.
- The per-kilometre rate is reasonable.
- You have not paid an allowance in addition to reimbursing the employee for some or all of the expenses related to the use of the vehicle.
If the reimbursement is solely for supplementary business insurance, tolls or ferry charges not covered by the allowance, the allowance is considered reasonable, provided the previous two conditions are met.
Reasonable per-kilometre rate
As a rule, we consider that a per-kilometre rate is reasonable if it does not exceed the rate that an employer subject to income tax is authorized to deduct under Québec tax laws and regulations.
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The type of vehicle and the driving conditions may also be taken into consideration in determining whether a given rate is reasonable. A rate that does not cover the expenses incurred by the employee is not considered reasonable.
If an allowance for the use of a motor vehicle is not reasonable, the full amount of the allowance you paid to an employee must be included in boxes A and L of the RL-1 slip. The employee may, however, claim a deduction in his or her income tax return for expenses related to the use of his or her motor vehicle, provided the requirements of the Taxation Act are met.
To claim the deduction, the employee must have you sign a copy of form TP-64.3-V, General Employment Conditions, or, in the case of a forestry worker, form TP-78-V, Employment Expenses of Forestry Workers, to certify that the general conditions of employment have been met.
Lump-sum allowance combined with a reasonable per-kilometre allowance
Where the employee receives, for the use of the same motor vehicle, both a lump-sum allowance and an allowance based on the actual number of kilometres travelled by the automobile, you must include both allowances in boxes A and L of the RL-1 slip.